IN THE NEWS / Gulfstream's Arco Deal Lifts Shares
Calgary Bureau The Financial Post
Gulfstream Resources Canada Ltd. gained 30% in active trading yesterday on news of an agreement with Atlantic Richfield Co.
The Calgary-based junior received about $44 million from Arco, the seventh-largest U.S. petroleum firm, in return for its interest in a Middle East field and renegotiating a contract.
The announcement, released before the market opened, lifted the stock (GUR/TSE) $1.10 to close at $4.75. The shares have more than doubled since Aug. 31, when they hit a 52-week low of $2.30.
Gulfstream sold its 25% of the Margham field in Dubai, United Arab Emirates, for $22 million. The field produces about 8,000 barrels a day of condensate, a natural gas liquid and generated about $3 million in cash flow in fiscal 1998 (ended Sept. 30.
The other $22 million compensates Gulfstream for altering the terms of its participation in a consortium working in neighboring Qatar. The five-company group is active in the country in three areas offshore -- the North field natural gas development, the
Al-Rayyan oil development and Block 11 appraisal.
Gulfstream and Los Angeles-based Arco each have a 27.5% interest in the consortium. Arco will pay all the Canadian firm's production and processing costs for the first 1.2 billion cubic feet a day of a gas project in Qatar. The price tag for such a proposal would be more than $2.3 billion, meaning Gulfstream's exposure would be $640 million.
The restructured agreement should improve investor confidence that the project, several years in the planning, will go ahead, said Gulfstream treasurer Jim Hart.
"We always thought financing would be our greatest challenge because we were a small company with huge assets," he said.
Once the gas begins flowing, most of Gulfstream's share of the revenue will go to repay Arco, but some of the money will boost its cash flow and income, Hart said.
The pact, signed after months of discussions, provides extra payments as milestones in the project's progress are achieved.
The consortium hopes to receive approval soon from the Qatari government.
Arco shares (ARC/NYSE) closed at US$71 5/8, up 1/2. |
